In an interesting story reported by the Montreal Gazette, the Quebec Federation of Real Estate Boards (“QFREB”) has filed a misleading advertising complaint with the Competition Bureau against the sale-by-owner real estate firm DuProprio (see also REM’s article and real estate industry commentary: QFREB files complaint against DuProprio with the Competition Bureau). DuProprio operates as ComFree in other provices (Ontario, Saskatchewan and Alberta).
According to allegations being made by QFREB, DuProprio is misleading Quebec consumers with respect to price and savings claims being made in relation to its real estate sales services (allegedly misleading claims being made “both in terms of their rates and the hypothetical savings that … promised to consumers”).
According to media reports, while the QFREB has not disclosed any specific examples of DuProprio advertisements being challenged as misleading, client testimonials being used by the firm include cost savings between $12,000 and $22,000 and the founder of DuProprio has made public claims that his firm can help clients save an average of $15,000 on broker costs.
While the scope of the QFREB’s Competition Bureau complaint against DuProprio is not yet clear, and it is also not clear if the Bureau will take any enforcement steps against DuProprio, comparative commission claims have caused friction between real estate firms before (both between members and non-members of Canadian real estate boards).
One of the key issues that can arise in comparative claims in the real estate commission context, and potentially lead to misleading advertising liability, is whether a competing firm’s (or firms’) commissions are known in order to make accurate comparative claims that are not misleading. In particular, full commission rates have not been displayed on real estate boards’ MLS systems since the 1980s, not all real estate agents advertise commission rates and commission rates are commonly negotiated on an individual listing or transaction basis.
As such, while there are no Competition Act prohibitions on either price or comparative claims, it would be important in making comparative price or savings claims in relation to commission rates to either have access to competitors’ commission rates (which could itself raise competition law issues) or appropriately qualify any comparative price or savings claims made (e.g., that comparisons are being made to a certain segment of advertised rates).
The general criminal and civil misleading advertising provisions of the Competition Act (sections 52 and 74.01) prohibit representations to the public that are either literally false or misleading in a material respect and can apply to a wide range of product and business claims, including comparative advertising claims. In addition, the standalone performance claims provision of the Competition Act requires advertisers to have conducted adequate and proper testing (i.e., possess relevant data) prior to making performance claims regarding a product or service.
In this particular case, comparative price or savings claims made by DuProprio could, depending on the facts, potentially be subject to challenge on the basis that they are literally false (e.g., the stated savings are not true), misleading (e.g., exaggerate the amount of savings) or also possibly under the performance claim provision, in the event that DuProprio does not have relevant commission rate data in advance of its claims to substantiate the claimed savings for using its firm.
Of course, in some instances, real estate services firm using this advertising approach (i.e., savings comparisons) sometimes state that stated savings assumes a certain competing commission rate. It is not clear, however, given any case that I am aware of on point whether this approach would necessarily cure an overall impression of actual savings that may, for example, vary based on actual completed transactions (in which commission rates may well be negotiated, and undisclosed, in many cases except to the parties).
It will be interesting to see whether the Bureau takes an interest in this case or will take enforcement steps, particularly given that the Bureau receives about 20,000 complaints annually, the majority of which according to recent remarks by representatives of the Bureau’s Fair Business Practices Branch are misleading advertising or deceptive marketing related. It will also be interesting to see whether any further details of the theory of the QFREB’s case against DuProprio come to light.
For more on Canadian misleading advertising law see: Misleading Advertising.
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